updates on eft? | Page 3 | Implicity Financial | Discussion forum

Yes, the CDIC and DGCM guarantee funds are small compared to total insured deposits. But, they are not small compared to the deposits of many of the institutions.

For example, CDIC-insured institution People Trust had $984.8 million of deposits at the end of 2012. CDIC's $2.566 billion guarantee fund is 261% of People Trust's deposits. Losses from People Trust loaning out its deposits would have to exceed the $114.4 million (11.6% of deposits) from its shareholders and retained earnings before CDIC would have to pay out. CDIC would likely intervene long before their loan losses reached 11.6%.

Sunova, who are behind Hubert Financial, had $822.4 million of deposits at the end of 2012. DGCM's $208 million guarantee fund is 25.3% of those deposits and would need to pay after losses exceed the $61.5 million of member equity (7.48% of deposits). DGCM would likely intervene long before the loan losses reached 7.48%.

Loonie said
I find myself wondering what happens when/if CDIC decides that an institution no longer meets the criteria for membership. I think, but am not certain, that in the case of the MB credit unions, they all are required to belong to DGCM. With CDIC, how would we know if an institution was taken off the list? And what happens if it is taken off the list WHILE we happen to have a 4 or 5 year GIC with them? As far as I can see, here is no mechanism for informing us, and nothing we can do about our GIC but hope.

There's details in sections 34 and 36 of the Canada Deposit Insurance Corporation Act about such situations:

34. (1) If the policy of deposit insurance of a member institution is terminated or cancelled by the Corporation, the deposits with the institution on the day the termination or cancellation takes effect, less any withdrawals from those deposits, continue to be insured under the terminated or cancelled policy of deposit insurance for a period of two years or, in the case of a term deposit with a remaining term exceeding two years, to the maturity of the term deposit.

(2) Subsection (1) does not apply in respect of a deposit with (a) a member institution if the deposit has been assumed by another member institution; or (b) a former member institution that has received authorization to accept deposits payable in Canada without being a member institution and the policy of deposit insurance of which has been cancelled.

(3) A corporation is not considered to be a member institution by reason only that its deposits continue to be insured under subsection (1).

...

36. (1) If the policy of deposit insurance of a member institution is terminated or cancelled, the member institution shall notify its depositors of that fact and shall remove all references to deposit insurance under this Act from all forms of advertising by the institution.

(2) The Corporation may, in the manner and through any news media that it considers appropriate, give public notice of the termination or cancellation of the policy of deposit insurance of a member institution if, in the opinion of the Corporation, the public interest requires that such notice be given.